The focus is mainly on the entrepreneurs and students from India who have shaped industries like technology and farming in the Bay Area.  A few things I learned:

- Indian-owned farms in California’s Central Valley produce 95% of the state’s peaches (why peaches?).
- There are more foreign students in California from India than anywhere else.
- In 1910, there were a total of 6,000 Indians in the US (imagine how tight that marriage market was)
- In 1990, 23% of Silicon Valley’s engineers were Indian.

By and large, doing work in India does not come at the expense of American jobs.

I’ve created a smaller pdf that features the excerpt on Monsoon and Badmash, or you can download the full report for free.

And, here is KQED’s Forum with a short show about the report:

Over the last 5 years, IT wages have been rising in India.  And for good reason!  Indian programmers are now some of the most experienced IT professionals in the world.

However, if alarmist blog posts are to be believed, this signals the beginning of the end for the still-nascent IT industry in India.   When Indian salaries are higher than American salaries, the incentive to offshore is gone.

Although I disagree with this premise for several reasons (the subject of future blog posts, I guess), I thought it would be interesting to try to figure out when the (cue horror film music) ‘Death Of Outsourcing’ is gonna go down.

So I channeled my undergraduate economics degree (ceteris paribus!!!) to figure this out.

Figuring out salary rates is easy.  But, if people are acting rationally (which economic professors are beginning to realize is a rare occurrence), they will consider more than just cost. Value must be factored into our equation.

Now, value is a subjective thing, but thanks to online marketplaces like oDesk, we can use ratings to understand the general value that customers are getting from the US and India.  We’ll use numbers from oDesk as our example.

For a variety of reasons, this is an admittedly flawed example,  but it serves our thought experiment just fine.

[For those who don't know, oDesk is an online marketplace that connects people looking for IT work with those providing it, like an eBay for IT.]

According to oDesk, Indian workers are paid an average of $11/hour, whereas American workers are paid $17.50.  There is a similar differential in value.  Indians received an average rating of 4.12 (out of 5), while Americans received an average rating of 4.48.

So, using these figures, you get a couple of simple insights:

In the oDesk marketplace, offshoring still makes rational sense, and the difference in value is surprisingly low.

Okay, okay, okay, there are several reasons this is flawed:

But, this example of one marketplace is still useful, and if you allow for a greater difference in value, the implications of the equation are clear:

If salaries are going up, value better go up even more.

More importantly, salaries ARE going up.  It’s inevitable, and demand for Indian IT will continue to push them up further.   And, other IT destinations such as Vietnam are now offering reasonable alternatives for low-level work.

Indian companies will be beaten on price, but they can continue to differentiate themselves by providing stronger experience, niche specialization, and seasoned communication/management.

It will be the companies that fight the urge to cut corners and compete on price who will succeed. Focus on improving value, and the long-term view is rosy.

It’s called consulting.

Which is why it hit me like a ton of bricks when I was reminded, by a well-intentioned friend, what this is called when an Indian company does it.

“Oh right, body shopping.”

It doesn’t matter whether your team has worked on high-profile projects and gained valuable, specialized experience in their niche.  If they come from a third-world country, you’re just shopping bodies.

A few decades ago, Y2K fears lead to the employment of hundreds of Indian programmers at Western companies.  It’s easy to understand how our terminology for global work evolved during this time.  Indian salaries were a low fraction of Western pay; and Indian companies lacked the wherewithal to challenge Western thought on their fledgling industry.

But why have these terms stuck?

These words were never fair definitions.  Yet even if you assume they were justified, our industry has evolved far beyond the days of searching for 2-digit date fields.  Indian companies handle critical business processes and lead R&D efforts for the Fortune 100 set.  So why do we allow the persistence of outdated terminology that cheapens our profession?

Are we waiting for Thomas Friedman to write another book?

But, Obama’s latest appeal to the blue collar workers of Ohio – the “Patriot Employers Plan” – sounds as ridiculous (and misguided) as the Patriot Act.

Basically, the plan rewards companies for keeping jobs in the US – something I personally believe is admirable (after all, he’s not running for President of India).

However, the problem is that the plan is, well, stupid:

Mr Obama’s plan met instant scepticism from otherwise sympathetic Democratic economists who said it would require a large regulatory apparatus to put into practice. They also said that companies could “game the system” by spinning off overseas subsidiaries in order to reduce the offshore-onshore workforce ratio. ‘

“I would say that this plan is borderline unimplementable,” said a Democratic economist in Washington. “It is also puzzling. Normally presidential candidates only come up with plans that are unrealistic when they are losing. But Obama is now the favourite.

Mr. Obama, it’s better to stick with strong US training programs, the elimination of tax breaks for companies that have offshore labor (we don’t need them and shouldn’t get them), and most importantly, to stop the hypocrisy that is American economic policy. You can’t lecture others about buying your entertainment, agricultural goods, and Coca Cola, if you won’t give them a fair shot to sell to you.

Read the FT article >>

On January 1st, we officially became Monsoon Company (after 7 years as BCM Digital). 

There was no obvious business reason for the name change.  We didn’t get acquired, change strategy, or get sued.   Instead, we changed our name for a much simpler (and perhaps more important) reason.

For too long, ‘outsourcing’ has being stigmatized as new and disruptive.  Due to political rhetoric and cultural biases, many of our competitors mask their Indian roots under an ambiguous identity (what’s an infosys?). But, the rhetoric doesn’t make sense.  

Global trade is as old as the monsoon winds that used to carry spice traders to India.   With our new name, we choose to celebrate our Indian team. 

And why not?  Their work has lead to long term relationships with Fortune 100 clients, dozens of innovative software products, and industry-leading expertise in development platforms like Vista, Ruby on Rails, and Facebook. 

It’s only appropriate to start with the current frontrunner.

Recently, Hillary’s stance adapts like time. IST, she’s pro; EST, totally against. PST, and we’re back to pro again.

Roll some context: the 90s The Clintons have a long history of support for free trade. NAFTA and increases to the H1B program are probably the strongest examples.

“Clinton’s positioning on outsourcing dates to the 1990s, when her husband’s administration aggressively pursued free trade agreements such as NAFTA that union workers today consider the start of a huge exodus of U.S. jobs to cheaper overseas competition.

During the rise of the Internet, the Clinton administration also distributed temporary-worker visas to hundreds of thousands of Indians who came to the United States for jobs at high-tech companies.”

source 1999 Clinton realizes a new-found love of the Indian community to begin the millenium:

“As Clinton pursued a Senate seat in 1999, the Indian American community stepped up its giving. Indian businessman Sant Singh Chatwal raised $500,000 for her in his Upper East Side penthouse, including $210,000 from 14 entities connected to him.”

Chatwal and the Indian community have continued to support Clinton’s presidential run:

“Chatwal is now a finance co-chairman for Clinton’s presidential campaign, and Clinton aides said they have counted more than $2 million in contributions raised at Indian American events.”

source 2002 Clinton spearheads a misguided attempt to bring Tata to Buffalo…misguided (imho) in the belief that the best way to justify the existence of offshore IT is to show that the “outsourcers also outsource.” But, the attempt exemplifies her continued openness to free trade.

“Four years ago, Clinton brought Tata Consultancy Services to Buffalo amid great fanfare and promises that its local operation might eventually employ up to 100 people. But the India-based company, one of the world’s largest outsourcing consultants, currently employs only about 10 people locally.”

source 2004 After Treasury Secretary John Snow argues that outsourcing may actually lead to a long term increase in jobs (opinions supported by economists Lawrence Klein and Greg Mankiw), Hillary decides she is against it:

“I don’t know what reality the Bush administration is living in, but it’s certainly not the reality I represent, from one end of New York to the other.”

(I guess she didn’t actually say anything in that quote, but the intent is clear.) source 2005 While in India, Clinton puts her sari back on:

“There is no way to legislate against reality. Outsourcing will continue. . . . We are not against all outsourcing; we are not in favor of putting up fences.”

source 2007 To one day become an enemy of Lou Dobbs…one can only dream. Clinton makes a speech in Silicon Valley, getting applause for a comment about increasing H1B allocation. Lou Dobbs thinks this is very bad. Lou Dobbs also thinks that immigration causes leprosy (look it up):

Invest in the US Here’s Clinton urging Indian companies to invest in the US…good advice:

“If the United States continues to outsource jobs to India in increasingly large numbers, people will begin to feel insecure and may very well seek more protection against what they view as unfair competition,” Clinton told Indian technologists during a July speech in Santa Clara, Calif. “America is not just a marketplace to get a foothold in. It’s a place to make lasting investments that will create jobs and economic growth for everyone.”

source Debate at Howard University in June, 2007 And finally, Clinton speaking at a debate at Howard University. Clinton starts with 4:30 remaining, expressing what seems to be the synthesis of her overall opinion – elimination of tax breaks, better training, etc., without explicitly speaking out against free trade. Of course, it’s a cop-out. But, so is almost everything during a presidential campaign:

If you run a small business, your work now transcends both the job description and the time zone. You spend days meeting with customers, refining requirements, pushing sales, and cleaning up finances.

At night, your team wakes up, and it is time to manage projects, have strategy meetings, and enforce (nag about) deadlines.

Somehow, you find time for a few hours of sleep before waking up to do the whole thing over again.

If you’re in the Bay Area tomorrow (Thursday), come find out why we still think it’s worth the effort (or not).

Maybe you make a big purchase, like a Honda or a BMW. Do you then refer to your car as your ‘outsourced’ ride? When you drink with your friends, do you get uncomfortable knowing that your champagne has been ‘outsourced’ to the French? How about when you eat a mango or a banana?

Of course not. Germans make better cars. The French know their wine. And produce comes from where it grows (or where people can pick it cheaply…California).

So why think of software that way? Global IT teams support cost advantages and time efficiencies that domestic teams simply cannot compete with. Done right, software can be developed more quickly and efficiently this way. From cars to wine to software, the principle is the same. It will inevitably get done where it can get done best.

As long as we refer to our work as outsourcing, we are stigmatizing something that is as old as civilization. What the monsoon winds did for the spice trade, the Internet does for software development.

So, let’s agree. Outsourcing is dead (long live outsourcing).

[and yes, this blog will soon have a new name]

First, a recap: this week, the Obama camp released an ‘anonymous’ memo to the press, berating Hillary Clinton for accepting money from companies that outsource, for investing in Indian companies, and no joke, for having Indian friends.

The Clinton camp circulated it widely, and Obama’s clean political image was appropriately slammed in the press.

To his credit, Obama apologized profusely, said he had no idea the memo was released, and apparently got really upset at his staff about it. To his discredit, no one on his staff got axed.

Whether or not this was Obama’s macaca moment, whether Obama should do more to apologize, whether someone should trademark Obamacaca (.com still available!), etc…all of those things are up to bloggers with way more time on their hands than me to decide. Heck, I still might vote for the guy.

For me, this moment is even more significant than all of that. The ObaMacacaMemo (say it three times fast) means…that…(DRUMROLL PLEASE) outsourcing has officially arrived to Indecision 2008.

Welcome to the party, Outsourcing! Come on in! Take a seat and grab a drink! You’re gonna have to sit behind Iraq & Global Warming, maybe a bit to the right of abortion & gay rights…oops, not that far right! Let gun control sit there…hey gun control! Blam blam! Ha ha! Hey listen, why don’t you sit next to Immigration – you guys both seem to piss the same people off! Ha ha, just kidding! Oh wow – this is your lucky day! That cutie John Edwards already wants a dance! Lucky you wore a comfortable sari!

Outsourcing has arrived, and she’s just getting warmed up.

For a while, you will probably just hear the Lou Dobbs fans, spreading borderline racist commentary and screaming about offshore phone support (as if it was better before). They will choke up the blogosphere and land prime-time slots on Fox News, arguing vehemently that it is inconceivable that cheaper goods and services could actually be good for an economy. And, they will tell you that you hate America if you think otherwise (for example and example.)

Then, John Edwards will remind us, repeatedly, that his father was a mill worker. I mean, like, thousands of times.

Finally, a few of the candidates who trail Hillary Clinton will decide to officially embrace an anti-outsourcing platform, resurrecting phrases like ‘Benedict Arnold CEOs’, since, apparently, they were so effective during the last election cycle.

And, so it will go…in Election 2008, and probably, in Election 2080, when a Klingon candidate will argue vehemently that inhabitants of Mars should not get the remote teleporter support jobs, despite the fact that the Martian education system kicks ass.

Note: I went to go see Barak Obama speak last week. He was amazing. Inspiring. Pragmatic. Funny. All of it. In his characteristic style, Mr. Obama swayed the audience into wild applause while running through issues such as political accountability, closing Guantanamo, and retooling education. Everything he said seemed fresh, devoid of the typical political ambiguity, and even more encouraging to me, outlandish Democratic rhetoric about global economics.

“Now why you gotta go and do that love, huh? Making things between me and you harder? Killing me, just when I think we’re there?”